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Chapter 3 Demand
 

Chapter 3 Demand

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    Chapter 3 Demand Chapter 3 Demand Presentation Transcript

    • Chapter 3: Demand
    • Wants vs. Demand
      • Wants are unlimited
      • Demand is affected by cost
    • Demand
      • Economically Speaking: Qty of a good or service one is willing and able to buy at various prices
        • If you are unwilling and/or unable to buy, you can’t demand
      • Law of Demand: People will buy more at a lower cost , and less at a higher cost
      • Price Effect: How Law of Demand affects us - we’ll buy more at a lower price than a higher price.
        • ( Prices = incentives, disincentives)
    • How to Graph Demand:
      • Market Demand : All possible P,Q combinations!
      Price (P) Quantity (Q) Demand (D)
    • What are considerations of demand?
      • Buying Power: “Bang for the Buck”
      • Diminishing Personal Value: “What’s more important to you?”
      • Diminishing Marginal Utility: “You CAN have too much of a good thing!”
        • Marginal: econ-speak for “extra”
        • Utility: econ-speak for “happiness, satisfaction”
      • Substitutes: “What else can you buy instead?”
    • Elasticity of Demand
      • Elasticity : How much does a change in price affect the quantity demanded?
        • Elastic: A Price ∆ can cause an appreciable ∆ in Qty demanded.
          • Price Effect is Strong - “Luxury”
        • Inelastic: A price ∆ does not really cause a ∆ in Qty demanded
          • Price Effect is Weak - “Necessity”
        • Quick Math Test: An  in Price =  in Qty
          • If the Revenue (P * Q) increases, then inelastic
          • If the Revenue (P * Q) decreases, then elastic
    • What Affects Elasticity?
      • Availability of Substitutes
        •  substitutes =  elasticity
      • % of Budget
        •  % of budget =  elasticity
      • Time
        •  time to adjust =  elasticity
        •  time to adjust =  elasticity
    • Price Effect vs. Change in Demand
      • Market Demand is the combination of all P and Q demanded
      • Various points along demand curve = Price Effect
      • A Change in Demand occurs when:
        • People demand  Q at all P
        • People demand  Q at all P
    • A Demand Curve Shift P Q D 1 D 2 D 3 D 1 = Original Demand D 2 = Increase in Demand D 3 = Decrease in Demand
    • What Causes A Demand Shift?
      • Change in Income
      • Prices or Availability of Substitutes
      • Prices or Availability of Complements
      • Change in Weather or Season
      • Change in # of Buyers
      • Change in Styles, Tastes, Habits
      • Change in Expectations